If depreciation equals zero and retained earnings equal $5 billion, then
A) GNP is less than net national product by $5 billion.
B) GNP equals net national product.
C) Net national product is less than GNP by $5 billion.
D) GNP is greater than GDP by $5 billion.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that reduces the value of an asset over time. When depreciation equals zero, it means there is no reduction in the value of assets due to their usage or age. Gross National Product (GNP) and Net National Product (NNP) differ by the amount of depreciation; without depreciation, GNP equals NNP because there is no value to subtract for the depreciation of assets. Retained earnings, which are the portion of net income not distributed as dividends, do not directly affect the relationship between GNP and NNP.

If Depreciation Equals Zero and Retained Earnings Equal $5 Billion